Crystal Ball 2019 Outlook Q&A: Todd Harvey, Fifth Third Private Bank

Volatility came back to the stock market in 2018 and Todd Harvey doesn’t see it going away in 2019. The director of Fifth Third Private Bank since 2012 and a wealth management professional for 16 years, Harvey believes the market next year will have to cope with rising interest rates amid a U.S. economy that will continue growing, although at a slower rate.

What’s the general market mood as 2018 winds down and we go into 2019?

I think we’ll see more of what we’ve seen this year. We saw volatility return back to the market and we saw a strong U.S. economy, and we see more of really the same going into next year. As we met with clients early in the year, there was little bit more of a reaction to the return of the volatility, but now we’ve gone through it throughout the year. Things are still good. Portfolios are in good shape. People are on track for their goals, and that’s really where we try to keep them focused.

Will 2019 bring more volatility or maybe some stability?

Economists continue to think more of the same. If we look back on volatility, this year is really more of a fairly normal year compared to the history of the market. Volatility is normal within the markets. There will be continued volatility, we think, on through 2019 and really going forward past that.

We’re awfully long in the present U.S. economic expansion. How is that affecting the decisions and the mood of investors?

We work with some of our economists and we follow closely what’s going on in the economy. The mood, I think, is really more of the same right now. We certainly deal with the question on a very regular basis. ‘This has been going good for quite some time. When does it end?’ But I think the sentiment of most of our clients is they’re used to it now. We work with them and talk with them about the strength of the U.S. economy. There are a lot of positive things if you’re looking at unemployment, if you’re looking at how businesses are performing. While we’ve been long in the cycle, that’s really the biggest indication that’s something’s going to be different — because of the length of time, and not most of the economic indicators. Clients are used to it at this point because they’ve seen this show before.

How will rising interest rates play into what occurs in the market next year?

There’s been some recent news, or at least sentiment, from the Federal Reserve chairman who gave some indication there was going to be maybe more increases in 2019 than what the market originally planned in. He came back and kind of stepped back those sentiments. We know where interest rates are going and as long as they’re in line with what the market thinks, it really should have minimal affect overall.

How are rising rates affecting clients?

There are two areas that I do think that continued interest rates rising will affect specifically our clients. We have clients that have had debt over time. Many of our clients don’t need to, but they do for various reasons. Large clients are starting to make some decisions on (whether) they want to continue to carry some of that debt or pay it off. Same with large businesses.

How else?

We’ve been (telling) people for years that interest rates are going to increase, so we definitely worked with clients to prepare them for that as it relates to their fixed-income portfolios, shortening durations and doing other things along the way. They’ve been prepared and we’ll look for opportunities to start lengthening those out, maybe, as interest rates begin to normalize and we don’t see them going up as much in the future.

As we head toward the new year, what are clients asking about most these days?

The biggest things on many people’s minds are tariffs, and we’re in Michigan so tariffs continue to be a question mark that’s out there and that’s getting a lot of attention. We’ve worked with some of our economists who really focus on the fact that there will continue to be compromise on that front, which is positive. But that is one thing that’s on everybody’s mind pretty much every meeting.

What would surprise you in 2019?

It would surprise me if the market went up or down in a straight line. It would surprise me if we don’t have continued pressure on interest rates increasing. It would surprise me if we all of a sudden have a truce with China and everything’s worked out. Many of these things are just going to take a long time and they’re more complex problems than we can solve in a short amount of time.